Retail merchants want feds to crack down online

Small gangs of armed robbers were holding up company stores all across Chicago. Every robbery went down nearly the same way: Armed bandits jumped over the counters and, within minutes, filled bags with thousands of dollars’ worth of diabetic blood test strips. The cash and other prescription medicines were left untouched.

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Eventually, after 15 robberies, Walgreens security collected enough photographs of the robbers to identify them for the police.

While the crime seemed unusual to retailers, it was a common example of an increasingly frequent type of organized retail crime — one that has led retailers all the way to Congress.

Increasingly, retailers say, gangs of professional shoplifters steal thousands of dollars’ worth of easily resalable merchandise, focusing on small, high-value products such as baby food, razor blades and medicines. They resell the goods at flea markets, through online auction sites and to smaller stores that don’t use the standard wholesale distribution chains.

The retailers are appealing to Congress for help, asking lawmakers to introduce legislation aimed specifically at cracking down on organized retail crime rings.

The stores blame online auction sites — particularly those that allow sellers to offer items anonymously — for boosting the crimes from a few stolen razor blades to enough theft to supply a burgeoning industry. They want Congress to limit the types of items that can be sold online and to require the sites to investigate their sellers.

“The wild, wild West has really opened up with respect to organized retail crime,” said Paul Jones, vice president of asset protection at the Retail Industry Leaders Association, which represents the country’s largest retail chains.

The proposal, though, has sparked an outcry from the e-commerce community that believes it would unfairly target its sellers and their business models.

“This is not about consumer protection; it’s about competition,” said Steve DelBianco, executive director of the NetChoice coalition of e-commerce businesses. “Retailers want to prevent competition from online sellers of new and used goods.”

Over the past few years, regulators have taken some action to curb organized retail crime.

In October, for instance, the House Judiciary Subcommittee on Crime, Terrorism and Homeland Security held a hearing on the issue. Last year, nine states passed legislation mandating stiffer penalties for organized retail thefts. And in January 2006, President Bush signed legislation establishing an organized retail crime task force within the FBI.

The retailers say those measures are a good start but don’t go far enough. Stores can catch the criminals, retailers say, but are hampered from prosecuting them because of inadequate legal protections.

In an April study by the National Retail Federation, 85 percent of retailers said their companies were victims of organized retail crime last year — a 6 percentage point increase from 2006.

“We feel 60 to 70 percent of our losses today are from organized retail gangs,” said Walgreens’ director of loss prevention, Ken Amos. “In the 10 years before I came into loss prevention, I saw the difference between one or two items missing to entire shelves going missing.”

Organized retail crime, retailers argue, affects more than just store profits. The most sophisticated gangs funnel their stolen profits into drug trafficking, money laundering and other criminal pursuits. State governments lose $1 billion annually in sales tax revenue, the National Conference of State Legislatures estimates. And retailers say the theft circumvents health regulations by putting hazardous goods, such as stolen baby formula long past its expiration date, back into the supply chain.